Office of the Attorney General
State of Texas

Re: Whether a contract for services of a construction
management consultant is excepted from competitive bidding
requirements of section 21.901 of the Texas Education Code (RQ-1335)

Dear Mr. McMullen:

You inform us that a school district undergoing rapid growth
seeks to employ a construction management consultant to advise
the district on numerous construction projects. You add that the
consultant is also a general contractor that has performed or is
performing work for the district in its capacity as general
contractor. You ask whether a contract for the services of a
construction management consultant is excepted from the
competitive bidding requirements of section 21.901 of the Texas
Education Code as a contract for 'professional services.' We
conclude that it is exempted from the competitive bidding
requirement.

Section 21.901 of the Education Code provides the following in
pertinent part:

(b) Except as provided in Subsection (e) of this section,
all contracts proposed to be made by any Texas public school
board for the construction, maintenance, repair or renovation of
any building or for materials used in said construction,
maintenance, repair or renovation, shall be submitted to
competitive bidding when said contracts are valued at $5,000 or
more.

(c) Nothing in this section shall apply to fees received for
professional services rendered, including but not limited to
architect's fees, attorney's fees, and fees for fiscal agents.

. . ..

(e) If a school building or school equipment is destroyed or
severely damaged, and the school board determines that the time
delay posed by the competitive bidding process would prevent or
substantially impair the conduct of classes or other essential
school activities, then contracts for the replacement or repair
of such building or equipment may be made without resort to
competitive bidding as otherwise required by this section.

Subchapter B of chapter 271 of the Local Government Code provides
competitive bidding procedures for contracts awarded by common or
independent school districts for the construction, repair, or
renovation of structures requiring an expenditure of more than
$10,000 from the funds of the district. Local Gov't Code s
271.024. Contracts that must be awarded under the terms of the
Professional Services Procurement Act, V.T.C.S. art. 664-4, are
exempted from these procedures. Id. s 271.022. Article 664-4
requires contracts for the professional services of licensed
physicians, optometrists, surgeons, architects, certified public
accountants, or registered engineers to be awarded primarily on
the basis of demonstrated competence and qualifications.

You describe the duties of the construction management
consultant as follows:

The overall function of a construction management consultant
is to control time and cost on behalf of the owner/school
district during the construction process. In this regard his
duties include without limitation: (1) establishing a project
budget; (2) pre-qualifying and interviewing architectural and
engineering firms and advising the owner/school district on the
final architect/engineer selection; (3) organizing the design
phase of the project; (4) establishing a project schedule from
design through to completion of the construction; (5) advising
and consulting with the owner/school district on materials,
construction methods, and the arrangement of the construction
contract package; (6) managing the bidding and negotiation
process; (7) handling contract awards; (8) providing coordination
among the various specialty contractors; (9) supervising the
work; and (10) establishing the project's accounting system. In
essence the construction management consultant accepts managing
responsibility of the entire construction process from design
through to the completion of construction. [FN1]

You do not indicate whether it is intended that the construction
management consultant will serve as the prime contractor or
subcontractor on any project covered by the consulting contract.

Section 21.907 does not define the phrase 'professional
services.' The courts have not adopted a universal definition of
the term; however, several cases suggest that it comprehends
labor and skill that is 'predominantly mental or intellectual,
rather than physical or manual.' Maryland Casualty Co. v. Crazy
Water Co., 160 S.W.2d 102 (Tex. Civ. App.--Eastland 1942, no
writ). It no longer includes only the services of lawyers,
physicians, or theologians, but also those members of disciplines
requiring special knowledge or attainment and a high order of
learning, skill, and intelligence. See Attorney General Opinion
MW-344 (1981); Black's Law Dictionary 1089-90 (5th ed. 1979)
(definition of 'profession').

Section 21.901(c) is a narrow exception to the strong public
policy favoring competitive bidding on contracts involving the
expenditure of public funds. Its purpose is to permit a school
district to obtain the professional services of the most
competent and experienced individuals available. See Attorney
General Opinion MW-342 (1981) and cases cited therein. This
purpose would be thwarted if the district was required to award
contracts for professional services to the lowest, and possibly
least qualified, bidders. Id. Another reason for dispensing
with competitive bidding is that professional services, unlike
construction work and materials, can seldom be measured with
objective criteria. Since construction work and materials must
conform to specifications of the school district's choosing, it
is reasonable to award contracts for such work or materials on
the basis of the lowest responsible bid. However, with work
involving specialized, technical, or aesthetic judgment,
considerations of cost yield to considerations of quality and
competence. The legislature has determined that these concerns
warrant a departure from the strict rule of free competition for
public contracts. Cf. Attorney General Opinions JM-881 (1988);
JM-712 (1987) (providing that the legislature may vary policy of
strict competition by providing exceptions to competitive bidding
statute).

We believe that the duties of a construction management
consultant as described in your letter qualify as 'professional
services' for the purposes of section 21.901(c). These duties
require a high level of knowledge, experience, and skill
consistent with the standards of professionalism described above.
See J. Canterbury, Texas Construction Law Manual s 6.10 (1981);
Minnesota Vikings Football Club, Inc. v. Metropolitan Council,
289 N.W.2d 426, 441-442 (Minn. 1979) (characterizing construction
management services as professional services). See generally, G.
Hardie, Construction Contracts and Specifications 34-35 (1981);
R. Meyers, The New Contractual Arrangements, in Construction
Contracts in the 80's 103-118 (1980). We also note the trend in
many states to except contracts for the services of construction
managers from competitive bidding requirements as either personal
or professional services. See State v. Brown, 422 N.E.2d 1254
(Ind. Ct. App. 1981); Mongiovi v. Doerner, 546 P.2d 1110 (Or. Ct.
App. 1976); Ohio Rev. Code Ann. s 307.86 (Baldwin 1985).

In Attorney General Opinion MW-530 (1982) this office concluded
that a contract for the services of a construction manager were
within the 'personal services' exception to the competitive
bidding requirement of article 2368a, V.T.C.S. That statute, now
chapter 252 of the Local Government Code, excepted contracts for
'personal or professional services' from competitive bidding
requirements imposed by the statute. The duties of the
construction manager were to include representing, advising, and
consulting with the county procuring his services, coordinating
and overseeing the work of contractors, and making
recommendations concerning the payment of contractors. The
attorney general determined that because these services involved
the personal, intellectual or manual labor of an individual, they
constituted 'personal services' within the meaning of the
statute. It was therefore unnecessary to consider whether such
services also constituted 'professional services' for the
purposes of the exception to competitive bidding. However, the
opinion quoted a passage from Hunter v. Whiteaker & Washington,
230 S.W. 1096 (Tex. Civ. App.--San Antonio 1921, writ ref'd),
stating reasons for exempting certain contracts from the
competitive bidding process. The same passage was quoted in
Attorney General Opinion MW-342 (1981) as the rationale behind
the 'professional services' exception to section 21.901. Thus,
it appears that through identical reasoning construction
management services may be characterized either as 'personal
services' under chapter 252 of the Local Government Code or
'professional services' under section 21.901 of the Education
Code. See also 64 Am. Jur. 2d Public Works and Contracts s 43
(equating professional services with personal services).

Earlier in this opinion, we observed that your description of
the duties of a construction management consultant did not
indicate whether the consultant would also serve as the prime
contractor or subcontractor on any construction project covered
by the consulting contract. We will now discuss the significance
of that issue.

Attorney General Opinion JM-282 (1984) concerned the use of
construction management contracts by state universities. The
facts provided to us stipulated that general contracting firms
were invited to submit bids for the construction of a project
based on only a general description of the project and were asked
to include hourly rates for consulting services in their bids.
The consulting services consisted of preliminary work with the
designers of the construction project, the preparation of cost
estimates for the project, the designation of work to be
performed by subcontractors, and the invitation and acceptance of
subcontract bids. The construction manager/contractor was
allowed to designate the work it would perform, or the university
could require it to perform preliminary construction work. At
the close of the design phase and preliminary construction phase
of the project, the contractor would submit a guaranteed maximum
price for the remainder of the project. The university could
reject the guaranteed maximum price and pay the contractor only
for the consulting services, or it could accept the price and
authorize the contractor to proceed with construction.

Section 51.907 of the Education Code provides that contracts
for the construction or erection of permanent improvements at
institutions of higher education are void unless they are made
pursuant to the competitive bidding procedures authorized
therein. After drawing a distinction between contracts for
construction and contracts for the planning or design of a
construction project, we concluded that work done prior to the
time a decision is made about who will perform actual
construction consists of professional or consultant services not
governed by section 51.907. Contracts for such pre-construction
services are governed by either article 664-4, V.T.C.S., or
article 6252-11c, V.T.C.S., which concerns the employment of
private consultants by state agencies. Neither statute
authorizes competitive bidding; the latter, however, requires an
agency to publicly invite offers for consulting services if the
consulting contract may be valued in excess of $10,000.

The opinion went on to address the issue of authorizing the
construction manager to perform construction work on the same
project for which it provided pre-construction services without
resort to competitive bidding. We answered in the negative,
taking note that section 51.907 voids contracts for construction
work not let in response to sealed competitive bids. We also
sounded the following caution:

Beyond that, in our opinion, a contractor who has acted as a
consultant for a university in the design of a facility, the
estimation of its costs, or the preparation of the specifications
therefor, is disqualified from bidding on the resulting
construction contract. The Texas Supreme Court, in Texas Highway
Commission v. Texas Association of Steel Importers, Inc., [372
S.W.2d 525 (Tex. 1963)], adopted the explanation of Texas
competitive bidding statutes given in Sterrett v. Bell, [240
S.W.2d 516 (Tex. Civ. App.--Dallas 1951, no writ)], saying the
purpose and intent of such statutes were well stated there. In
part, the Sterrett court said competitive bidding 'requires that
all bidders be placed upon the same plane of equality.' 240
S.W.2d at 520. It also said the purpose of such a statute, among
other things, was to 'prevent favoritism,' and '[t]hat there can
be no competitive bidding in a legal sense where the terms of the
letting of the contract prevent or restrict competition, [or]
favor a contractor or materialman . . ..' Id.

A potential bidder is undoubtedly put in a favored position
over other potential bidders if he drafts the specifications of
the job to be let or participates in the design and cost-estimating decisions of the owner. All bidders are not placed on
the same plane of equality. In our opinion, such dual activities
create a conflict of interests as well.

Attorney General Opinion JM-282 (1984) at 8. We closed the
opinion by observing that a construction management consultant
was at least within the spirit, if not the letter, of article
6252-9b, V.T.C.S., which announces a policy forbidding state
officers or employees to hold any interest, financial or
otherwise, direct or indirect, that is in substantial conflict
with the proper discharge of their duties.

We believe similar words of caution are warranted here.
Because the construction management consultant will be
responsible for the preparation or coordination of information
necessary to formulate bid specifications, i.e., project costs
and design requirements, it will enjoy an overwhelming advantage
over all other potential bidders for the general contract.
Furthermore, since the consultant will manage the bidding and
negotiation process, it will know what its competitors' bids are,
thereby permitting it to submit a lower bid. We therefore
conclude that the construction management consultant described in
your letter would be disqualified from bidding on any contract
for the construction of a project for which it serves as
consultant to the school district.

SUMMARY

A contract for the services of a construction management
consultant is excepted from competitive bidding by section
21.907(c) of the Texas Education Code as a contract for
'professional services.' Contracts for the construction of
projects subject to the consulting contract must be submitted to
competitive bidding in accordance with section 21.907. A
contractor is disqualified from bidding on a contract for the
construction of a project for which it serves as construction
management consultant to a school district.

Very truly yours,

Jim Mattox
Attorney General of Texas

Mary Keller
First Assistant Attorney General

Lou McCreary
Executive Assistant Attorney General

Judge Zollie Steakley
Special Assistant Attorney General

Rick Gilpin
Chairman
Opinion Committee

Prepared by
Steve Aragon
Assistant Attorney General

Footnotes

FN1. We assume that the school district does not intend to
delegate the power to make final decisions to a consultant. See
Attorney General Opinion JM-932 (1988).